Activity Based Costing Time Driven
Time Driven Activity Based Costing
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According to Bob Kaplan of Harvard and Steve Anderson of Acorn Systems time driven activity based costing addresses many of problems early implementers of activity based costing faced. In this approach, "managers estimate resource demands imposed by each transaction, product, or customer, rather than relying on time-consuming and costly employee surveys.

This method is simpler since it requires, for each group of resources, estimates of only two parameters: how much it costs per time unit to supply resources to the business's activities (the total overhead expenditure of a department divided by the total number of minutes of employee time available) and how much time it takes to carry out one unit of each kind of activity (as estimated or observed by the manager).

This approach also overcomes a serious technical problem associated with employee surveys: the fact that, when asked to estimate time spent on activities, employees invariably report percentages that add up to 100. Under the new system, managers take into account time that is idle or unused. Armed with the data, managers then construct time equations, a new feature that enables the model to reflect the complexity of real-world operations by showing how specific order, customer, and activity characteristics cause processing times to vary."*

*Acorn Systems web site

Call or email below John Antos at 972-980-7407 to find out how we can help you reach your goals with time driven Activity Based Costing

Time Driven Activity Based Costing Overcomes Implementation Obstacles

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